Ford, Mazda Deny Plans to End China Venture

Ford Motor Co. and Mazda Motor Corp.. said on Monday they had no plans to dissolve their car making joint venture in China, which overtook the United States as the world's largest auto market in 2009.

Representatives for the two companies were responding to a report by Japan's Nikkei business daily on Sunday saying they and China's Chongqing Changan Automobile Co. had agreed to end their three-way tie-up by 2012.

"We have a good relationship with both our partners and there is no plan currently to dissolve the joint venture," Mazda spokeswoman Christine He told Reuters.

Ford's spokesman Teddy Liu dismissed the report as "speculation," and so did another representative from Mazda.

A Changan spokesman also said the three partners had a good relationship and had never discussed a possible break-up.

Mazda's ties with Ford have weakened since the U.S. automaker reduced its controlling one-third stake in Mazda to 13 percent in 2008 to free up cash. Ford currently owns about 11 percent of Mazda, Japan's No.5 automaker.

Auto industry partnerships have been in focus in recent weeks, with Suzuki Motors and Volkswagen AG announcing an equity tie-up and Mitsubishi Motors and France's Peugeot in talks to deepen their ties to ride out the industry's worst ever slump.

Despite the denial by all three partners, a pullout of Mazda could actually be positive for the Japanese automaker, which has just a 15 percent stake in the venture, analysts said.

"The move will be positive for Mazda (if true). Mazda sells very well in China, but the problem is that the maker can't decide anything in China by itself as it has a minority stake in the joint venture," said Koji Endo, auto analyst with Advanced Research Japan.

Mazda started making the Mazda 6 in China in March 2003 through a technical cooperation pact with FAW Group, China's No. 2 automaker.

It joined Ford's car making venture with Changan three years later, which now makes Mazda 2 and Mazda 3 compact cars as well as Ford's Focus, Fiesta, Mondeo, S-MAX, Volvo S40 and S80 models. Ford is currently selling its Volvo unit to China's Geely.

Ford, which broke ground for its $490 million third China plant in September last year, owns a 35 percent stake in the venture, with Changan holding 50 percent.

One option for Mazda, analysts say, is a full-fledged 50-50 manufacturing tie with FAW — also a Toyota Motor and Volkswagen AG partner — which could give Mazda an equal say in any major business decisions. Foreign ownership in vehicle manufacturing ventures in China is capped at 50 percent.

But the big issue for Mazda is that it relies heavily on the Ford partnership for production development globally, industry observers say.

If the No.2 Detroit automaker is indeed moving in the direction of liquidating its stake in the company, then Mazda would partner with someone else.

"We hear these rumblings now and again that Ford and Mazda will stop producing vehicles together. (If this latest news is true), it suggests that Ford will reduce its share in Mazda in the coming years, as well," said John Bonnell, a senior director of strategic advisory services with J.D. Power Asia Pacific.

China has been a major bright spot amid a sharp industry downturn thanks to Beijing's aggressive policy incentives, which had effectively bolstered automobile demand.

Vehicle sales in the country jumped 46 percent to a record 13.6 million units last year, well exceeding its previous target of 10 million units, official data showed.

Sales will continue to grow at a solid pace of roughly 10 percent this year, on continued policy support from Beijing and pent-up demand in smaller cities, industry executives and observers said.

Sales of Mazda models made at the China venture came to 72,697 units in 2009, about 40 percent of its total annual sales of 179,679 in the country, company data showed.

Ford sold 440,619 vehicles in China last year, up 44 percent from 2008.

Ford Motor Co. and Mazda Motor Corp.. said on Monday they had no plans to dissolve their car making joint venture in China, which overtook the United States as the world's largest auto market in 2009.
Representatives for the two companies were responding to a report by...